SYLLABUS

GS-3: Conservation, Environmental Pollution and Degradation; Changes in Industrial Policy, and Their Effects on Industrial Growth.

Context: The Union Government recently amended greenhouse gas emission-intensity targets for petroleum refineries and textile units, revising their baselines and compliance schedules under India’s carbon-market framework. 

Key Changes in the Emission-Intensity Targets

• Revised Schedules: The Greenhouse Gases Emission Intensity Target (Amendment) Rules, 2026 substitute the existing Second Schedule entries for the Petroleum Refinery and Textile sectors.

• Refinery Baselines: Baseline emission-intensity values have been revised for several refineries, including Indian Oil facilities at Digboi, Gujarat, Guwahati, Haldia, Mathura, Panipat and Paradeep, with corresponding changes in their targets.

• Compliance Schedule: The revised schedules retain numerical targets for 2026–27, while the 2025–26 target columns contain no numerical targets.

• Coverage: The revised schedules cover 21 petroleum refineries and 173 textile units across specified textile sub-sectors.

Understanding Greenhouse Gas Emission-Intensity Targets

• What is GEI? Greenhouse Gas Emission Intensity (GEI) refers to the quantity of GHG emissions per unit of industrial output, expressed using CO₂-equivalent measures.

• Intensity vs Absolute Emissions: An absolute emissions target seeks to reduce total emissions, whereas an emission-intensity target seeks to reduce emissions per unit of output. Thus, production can grow while emissions intensity declines.

• Evolution of the Framework: The Government first notified GEI targets in October 2025 for Aluminium, Cement, Chlor-Alkali and Pulp & Paper, covering 282 obligated entities. In January 2026, the framework was expanded to Secondary Aluminium, Petroleum Refinery, Petrochemical and Textile sectors, adding 208 entities and taking total coverage to 490 obligated entities. 

• Present Amendment: The September 2026 amendment now substitutes the previously notified entries for Petroleum Refinery and Textile, revising their baseline emission intensities and corresponding targets. 

• Baseline and Target: Each obligated entity is assessed against a specified baseline emission intensity and a target for the relevant compliance year. The current framework uses 2023–24 as the baseline for the additional sectors notified in January 2026.

• Why Intensity Targets? They encourage industries to improve energy efficiency, production processes and adoption of low-carbon technologies, while allowing continued economic activity.

India's Carbon Credit Trading Scheme: How Does It Work?

• Carbon Credit Trading Scheme (CCTS): Notified in 2023, the CCTS provides the overarching framework for India's Indian Carbon Market (ICM). Its objective is to reduce, remove or avoid GHG emissions by pricing emissions through the trading of Carbon Credit Certificates (CCCs).

• Compliance Mechanism: Designated energy-intensive industries become Obligated Entities and receive entity-specific GEI targets. Those that outperform their targets are eligible for CCCs, which can be traded with obligated entities that are unable to meet their targets.

• Two Mechanisms: The ICM comprises a Compliance Mechanism for obligated industries and an Offset Mechanism under which eligible emission-reduction, removal or avoidance projects can generate credits according to approved methodologies.

• Monitoring and Verification: The framework includes Monitoring, Reporting and Verification (MRV) procedures and accreditation of carbon verification agencies to establish the credibility of emission reductions and carbon credits.

• Institutional Architecture: The ICM has a National Steering Committee for overall governance, with the Bureau of Energy Efficiency (BEE) as administrator and Grid Controller of India as registry.

• Non-Compliance: Obligated entities failing to meet their prescribed requirements can face environmental compensation, with the current GEI framework linking the compensation to carbon-credit market prices.

India's Carbon Market: Significance and Concerns

• Industrial Decarbonisation: GEI targets create economic incentives for energy-intensive industries to adopt cleaner technologies, improve efficiency and reduce emissions intensity.

• Carbon Pricing: By assigning tradable value to emission reductions, the ICM seeks to incorporate the cost of carbon emissions into industrial decision-making.

• Climate Goals: The carbon market is part of India's broader strategy for low-carbon development and its long-term net-zero emissions goal for 2070. The Government has also strengthened its 2035 NDC targets, including a 47% reduction in GDP emissions intensity from the 2005 level.

• Market Integrity: Effective MRV, verification and credible methodologies are essential to ensure that traded credits correspond to genuine emission reductions and to minimise risks such as double counting.

• Predictability: Timely notification of targets and stable compliance requirements are important for industries to plan long-term decarbonisation investments and for the carbon market to develop credible price signals.